Towards Zero Harm

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TOWARDS ZERO HARM – A COMPENDIUM OF PAPERS PREPARED FOR THE GLOBAL TAILINGS REVIEW

TOWARDS ZERO HARM – A COMPENDIUM OF PAPERS PREPARED FOR THE GLOBAL TAILINGS REVIEW

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RELATED INITIATIVES

CHAPTER XVI INVESTOR MINING AND TAILINGS SAFETY INITIATIVE Stephen Barrie, Deputy Director, Ethics and Engagement, Church of England Pensions Board Elaine Baker * , Professor, University of Sydney and GRID Arendal, Arendal, Norway, John Howchin † , Secretary General, Council on Ethics of the Swedish National Pension Funds AP1-4 Adam Matthews † , Director of Ethics and Engagement, Church of England Pensions Board

Responsible investors seek improvements in the underlying companies in their portfolios, and they do this using a number of tools. These include: letters engaging directly with the Board (e.g. the Chairman, CEO and lead independent Director); face to face meetings between shareholders and Board members; proxy voting; and the filing of shareholder resolutions (where shareholders vote or raise issues to be voted on at the Annual General Meeting). Investors also seek to influence companies indirectly, such as through the development of formal shareholder expectations or assessment tools, where investors publish and support particular standards they expect to be met; and through regulatory influence, where investors seek to improve the regulatory environment. It is relatively unusual for investors to attempt to engage with an entire sector. However, there are some examples where systemic challenges are evident, such as in relation to climate change. At some of the early investor roundtables, the Investor Mining and Tailings Safety Initiative (‘the Initiative’) began to develop the shared view that tailings represent a systemic challenge for the sector and for other sectors linked to mining through the supply chain. This confirmed and developed views previously expressed by GRID Arendal (Roche, Thygesen, and Baker eds. 2017) and the Church of England (Church of England Ethical Investment Advisory Group 2017), among others. 3. INTERVENTIONS On 31 st January 2019, after the official mourning period for the victims of the Brumadinho disaster ended, members of the Initiative first made a public call for new global tailings standards to be developed, based upon the consequences of failure. Investors called for the standards to be developed independently from industry and with an emphasis on public accessibility (Church of England Media Briefing 2019a). This was one of the key drivers for establishing the Global Tailings Review (GTR). It led to the Principles for Responsible Investment (PRI) becoming a co-convenor of the GTR, in conjunction with the Church of England Pensions Board and Swedish Council on Ethics as the PRI’s investor representatives. During the consultation phase of the GTR, the PRI investor representatives consulted with the wider Investor Mining and Tailings Safety Initiative members to develop the PRI’s input into the GTR process.

It has also invited and gathered extensive new disclosures on tailings storage facilities, and it continues to work on ways to encourage and assess safe tailings practice. This chapter provides some context in relation to the responsible investment approaches of investors more broadly, and outlines the interventions made by the Initiative in 2019 and early 2020.

2. ROLE OF THE ETHICAL/RESPONSIBLE INVESTMENT IN TAILINGS REFORM

A significant and growing proportion of investors take the view that thinking about and acting on environmental, social, and governance (ESG) considerations represents an important part of what it is to be a good long term investor. For many financial institutions, attending to these aspects of the companies they own helps them to control for risk and create competitive advantage. Academic research appears to support the view that there is a positive relationship between ESG factors and corporate financial performance (Busch et al. 2018), and globally there is increasing regulatory guidance indicating that ESG considerations ought to be integrated into decision making (Figure. 1) For some investors, uncovering troubling policies, practices, or events results in disinvestment and exclusions, where an investor excludes a particular company from their portfolio. Standard exclusions cover companies involved in the manufacture of controversial weapons (e.g. cluster bombs, chemical and nuclear weapons) and the most carbon intensive companies (e.g. thermal coal and tar sands producers). Exclusions may also include so called ‘sin stocks’ such as companies that derive revenue from tobacco, gambling, and pornography. Where concerns are raised about a company that does not fall under these headings, standard practice is for investors to engage with the board of the company over a period of time, to try to seek improvements. Some investors, including the Church of England’s investing bodies, the Swedish AP Funds and Germany’s Union Investments, have excluded investment in Vale (Financial Times 2019). However, the approach of the Investor Mining and Safety Initiative is one of positive engagement with the industry, recognising that good practice exists in the sector and seeking to bring influence to bear in order to improve safety practices 1 .

1. INTRODUCTION The Investor Mining and Tailings Safety Initiative (‘the Initiative’) was established following the Brumadinho tailings dam disaster that occurred at a Vale owned iron ore mine in Brazil on 25 th January 2019. The Initiative, chaired by the Church of England Pensions Board and the Council on Ethics of the Swedish National Pension Funds, is supported by 112 international investors with over USD $14 trillion

in assets under management. The Initiative aims to improve understanding and transparency related to the social and financial risk associated with tailings dams and to act to ensure that best practice and standards in the management of mine tailings are implemented. It has been successful, especially within the investor community, in raising awareness of the potentially catastrophic damage that tailings dam failure can have on communities and the environment.

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Source: PRI responsible investment regulation database

Figure 1: Global cumulative number of ‘hard and soft law’ policy interventions per year promoting consideration of ESG factors

1. Investors have long engaged with mining companies on other safety matters, for example in relation to welfare, operational health and safety, and fatalities.

* Member of the GTR Multi-stakeholder Advisory Group † PRI Co-convener